Question : Statement 1: The consumer achieves equilibrium when the marginal utility per dollar spent is equal for all goods.
Statement 2: At equilibrium, the consumer maximizes their total utility within the constraints of their budget.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Both statement 1 and statement 2 are true.
Solution : The correct answer is (c) Option C: Both statement 1 and statement 2 are true.
Statement 1 is true. The consumer achieves equilibrium when the marginal utility per dollar spent is equal for all goods. This means that the consumer allocates their budget in such a way that the last dollar spent on each good yields the same additional utility.
Statement 2 is also true. At equilibrium, the consumer maximizes their total utility within the constraints of their budget. This means that the consumer has allocated their budget in a way that maximizes their overall satisfaction or utility, given the prices of goods and their income.
